How to Save the Corporation

By Peter S. Grosscup
[Peter S. Grosscup (1852-1921) served as Justice of the United States Circuit Court of Appeals]

If, by national prosperity, we mean what the American people, in the mass, are achieving, in the way of increased material output, and power of productivity; if, by national prosperity, we mean that in the mass, our people are richer than in any previous period; that our territory and dominion have been pushed forward, and our influence in the councils of the nations established, as never before; if these things, relating to the people as a whole, constitute national prosperity, then, as never before, we are in a time of the very greatest prosperity. But is there not with a nation, as with an individual, apart from the mere outward life, an inner spirit or soul? And what shall it profit our country if it gain the world, and lose its soul?

Loss of Individual Hope

The soul of republican America is not in our ambition, as a people, to be great commercially and politically; nor our ambition for increased national territory, national power, or national wealth. The soul of republican America, as a civil government ordained to promote the welfare and happiness of its people, is individual opportunity — the opportunity and encouragement given to each individual to build up, by his own effort, and for himself and those dependent upon him, some measure of dominion and independence all his own. In that one phrase — measurable individual independence, and the opportunity to measurably exercise individual dominion — is comprised the civil history of the Anglo-Saxon race. Our commercial greatness as a people is not in danger of being lost; nor is our increasing national power and prosperity. The loss that republican America now confronts is the loss of individual hope and prospect — the suppression of the instinct that heretofore coming into the American boy’s first grasp of the idea of individual career, and stimulating him ever afterwards, has made us a nation of individually independent and prosperous people. We are, I believe, in the first stage of a sweep of events, that unless turned to a purpose widely different from that now served, will carry us, eventually, to a time when the acquisition of property, by the individuals who constitute the bulk of our people, will cease to be one of the opening and controlling purposes of their lives. This means that, as a republican political institution, America will have lost the spirit which alone promises it life. It means social and, eventually, political revolution.

The thing at which I point is no apparition. It is an approaching fact — a fact that the people of this country have already intuitively discerned. On what theory, other than that of the existence of deep-seated popular apprehension, can be explained the widespread popular movement that brought about the Sherman Anti-Trust act; the anti-trust acts of the several states; the movements against large corporations, based on no better reason, in most instances, than that the corporations were large; the disposition manifest in every quarter, not to accept, but to combat, the rising forms of modern industrial activity? This popular apprehension does not rise solely from anxiety about prices. It grows out of the intuitive perception that, somewhere, something is wrong — that in the face of the future there is a disturbing, even sinister look. To test this intuition by the facts — to turn the feeling, so far as I can, into a correct perception of the facts — is one of the purposes of this article.

Let me preface it by saying that against corporations, as corporations, I have no enmity. Modern civilization requires that capital shall be wielded in large masses. The corporation is civilization’s method of wielding capital in large masses. On that account the corporation is here to stay. The big corporation is here to stay. The only institution in sight to supplant it is state socialism; and state socialism is revolution accomplished

“Private Property” the Foundation of Civilization

But the fundamental basis of the corporation is the institution of private property and the guaranties our government gives to private property. Now it so happens that the fundamental basis of the thing I have called measurable individual independence, and the opportunity measurably to exercise individual dominion, is also this institution of private property.

Around the institution of private property, therefore, more distinctively than anywhere else, center those changes, in our social and national life, that have been brought about by the appearance of the corporation as the great industrial, modern agent, and that the corporation is destined, I believe, to still more radically bring about. What, then, is this institution of private property, and what is the distinctive transformation it is undergoing as the result of corporate dominion?

In the beginning the Creator so conditioned mankind, that always underneath him would be the earth; always about him the air; always above him the sky. On this, as a dowry, He started us. In the earth He placed the seed, and the powers of motherhood that transform the seed into the full ear. In the bowels of the earth He stored the minerals. In the upper air He leashed the lightnings. And in the earth and air He left them all to wait — to wait for mankind to put forth its hands.

The seeds flowered and bore fruit; but in primitive inadequacy. In course of time mankind discovered that, by intelligence and industry, the flower could be beautified and the fruits sweetened. The minerals were alive, but with energies imprisoned. In course of time mankind found the key to the prison door; and the prisoners, liberated, have built the material structures of civilization. The lightnings glowed and zigzagged, calling out to us unceasingly, at times startling us, determined, like sentient beings, that their capacity of usefulness should not be overlooked.

In the course of time, the yoke was found that, adding these energies of the air to the forces of earth, brighten and strengthen our possession of the earth. The distance thus traveled, from primitive man to the man of today, has been a long one. But every mile was made under the spur, and governed by the rein, of private property. It was the institution of private property that, more than any other secular agency, brought us to civilization; and on this institution, as on a rock, the civilization of the world, and the world’s republican institutions, must continue to rest.

The Foundation is Shifting

Now, it is just this institution of private property that is undergoing, at this time, a strain never put on it before. The weight producing the strain is the corporation. Not because the corporation, in essence, is retrogressive and unrepublican; but because, in fact, it is unrepublican, and for that reason retrogressive also. Not because the corporation is big and growing bigger; but because, in all this growth of superstructure, the base is narrowing — the proprietorship of the private property of the country, by the bulk of the people of the country, is radically narrowing.

A generation ago, the artisans of the country lived in the country towns. In the country towns were made the shoes we wore, the wagons and carriages, the stoves, the saddlery we used — all the appliances of life; and over the door of each shop hung the sign of the proprietor within. A generation ago, the farm work was done by men living on the farms.

All this is now changed. Nearly one-half of the population of the United States — twelve million active workers, supporting as dependents twenty four millions more — are now connected with the mechanical trades. The men who, in the time of which I have just spoken, with their own hands did the planting and cultivating and harvesting, are now in the manufacturing centers, making the machines that plant and cultivate and harvest. The artisan proprietors in the towns have been succeeded by artisan employees in the great factories. The whole scene of industrial activity has been shifted from town and country to the cities; from the numerous small dominions exercised by individuals, to colossal corporate dominions.

The extent of this shift is told in the census figures. In 1900, according to the census of that year, the whole value of all the farms, the farming utensils, horses, reapers and binders, plows and farm products on hand unsold — that which on a single day would have constituted an inventory of all the agricultural interests from Maine to California — amounted to between eighteen and nineteen billions of dollars; while the capital invested in corporations, including railroads, factories of all kinds, and their products on hand unsold, amounted to twenty-two billions of dollars. Thus corporate dominion has, within thirty years, beginning with almost nothing, outstripped agricultural ownership by more than three billions of dollars; and, barring city real estate, comprises now nearly one-half of the whole wealth of the country.

In the swing of the industrial system, the corporation has come to be the gravitating force that holds the activities in their orbits. Is it much wonder that, in the eyes of those who look upon the corporation as an interloper, it has come to be regarded as a usurper also — the usurper of what the labor of individual men has created; or, that in the eyes of those who, with clearer vision, look upon it as an indispensable phase of industrial evolution, the way in which the corporation shall thereafter be organized, and the bounds given to its dominion, are coming to be the paramount political problems of our time?

Banks and Bonds Starve Small Enterprises

Now the shift in dominion over private property, from the individual of a generation or so ago to the corporation of today, would have little significance comparatively, if the corporation were only this age’s new way of unifying, massing, individual ownership — leaving the people of the country, generally, though under this new form, the ultimate real owners. But such, unhappily, is not the case. The effect of the corporation, under the prevailing policy of the free, go-as-you-please method of organization and management, has been to drive the bulk of our people, other than farmers, out of property ownership; and, if allowed to go on as at present, it will keep them out. When the individual proprietor of the past sells out his business to the corporation, he does not reinvest his capital in his old line of business. He puts it in the bank, or in some bond. When the workman has got together some savings, he does not become a proprietor or part proprietor. He spends it, or puts it in the bank. To men like these, no kind of active investment, practically considered, is left open. The industries are now dominated by the corporation, and proprietorship in the corporation has come to be for those only who are experienced in corporate ways, or who are willing to take a chance at the corporate wheel. And thus it happens, that just at this moment, we are in the midst of a sweep of events, that unless arrested and turned to a different account, will transform this country from a nation whose property is within the proprietorship of the people at large, to a nation whose industrial property, so far as active proprietorship goes, will be largely in the hands of a few skilled or fortunate so-called captains of industry, and their lieutenants.

Let me set out some of the proofs of the case I have thus undertaken. I might appeal, and with convincing success, too, to the memory of my readers. But I do not rest my case there. I call as witness the figures gathered from the Treasury Department of the United States, and distributed as a part of its official publications. These figures show that the deposits in the banks of the United States in 1880 — national, state, and savings — amounted to a little over two billion and a quarter dollars. The same deposits, in 1904, had grown to about eleven billions. In these figures are included no redeposits. The figures represent the actual bank credits for the years named. Now bank credits, outside the sums that constitute the mere fluid working capital of the country, represent the capital that one class of people are withholding or withdrawing from other forms of investments, that another class of people may borrow and utilize it to push forward their own investments. Would we know who are the people who are withholding and withdrawing from other forms of investment the capital thus deposited, we must inquire who are the depositors; and would we know whether these people are withholding and withdrawing from other investments in a ratio greatly disproportionate to the growth of the general property, we must compare the ratio of deposits with the general growth of property.

Hoards of the Working People

Now, in the main, the depositors in our banks and savings societies are not people whom we call the rich. The deposits are gathered largely from the working people and from other people of moderate means. The bulk of the deposits are in the money centers, but their source, like the sources of a great river, are not in the volume of the river itself, nor its larger branches, but in the little springs and raindrops that, unnoticed, form the rivulets; these in turn uniting to form the branches and finally the river itself. To test this my reader need but go to the savings and other banks of his own town. I know of one county with a population of less than twenty-five thousand — an agricultural county without a millionaire in it — whose deposits are well upward of a million. I know another county with a population of perhaps fifty thousand — one-third of whom are connected with the mechanical trades — whose deposits are three and one-half millions. This means, then, that the people who are withholding or withdrawing from active proprietorship the capital thus represented by bank credits, are not the rich, but the people of ordinary means; and it brings us to the next inquiry. What is the disproportion, if any, between the growth in general wealth and this growth of bank credits?

From 1880 to 1904, the population of the country (estimated since 1900) has grown a little over fifty per cent. From 1880 to 1904 (estimated again since 1900), the general wealth of the country — farms, farm implements, city real estate, corporate ownership, bank deposits, everything of every kind and nature — has grown as much perhaps as sixty per cent. In 1900 it was estimated by the government that an equal distribution of the wealth of the United States among its people in 1880 would have yielded to each about one thousand dollars, while such distribution in 1900 would have yielded about eleven hundred dollars. The growth of wealth per capita, therefore, during these two decades, was about ten per cent.

Now mark! During this same period, the amounts invested by our wage-workers and people of ordinary means, in bank deposits — that is, the amount withheld or withdrawn by them from active proprietorship, and left with the banking institutions to loan out to those skilled in the ways of corporations — have grown over five hundred per cent.

To illustrate: suppose a community in 1880 possessed a million dollars, one hundred thousand of which was in bank credits, and the balance in other forms of property; suppose this same community is found in 1904 to have five hundred thousand dollars in bank deposits alone, or five times the former amount. One of two things is apparent: either the community’s population and general wealth have grown proportionately — that is five hundred per cent — or the growth of the bank credits has been at the expense of proprietorship in other forms of active property. Now, what conclusion would be forced upon us if in that community the growth and general wealth was, not five hundred per cent, but only fifty per cent; or, taking the per capita growth as a nearer guide, only ten per cent? Could any one doubt, on such a state of affairs, what was taking place in the community? Can any one doubt, then on the figures I have named, what is taking place respecting the proprietorship of the active properties of the country by the bulk of the people in the country?

It should be borne in mind, too, that the transformation indicated is not a mere pin speck on an otherwise spotless sheet of paper. Were it so, it could perhaps, in the wider vision that makes up judgment on great questions, be safely overlooked. But it cannot be safely overlooked, for the transformation relates to the whole of property that makes up, almost entirely, the last quarter of a century’s addition to our national wealth; to just that property, too, that attracts and fills most completely the public eye.

Nor, viewed purely as a question of economics, can the transformation be ignored. The industrial complaint that has greatest voice today is the danger of monopoly. Corporations owned widely by the people might, perhaps, become monopolies; though I know of no actual instance of a monopoly widely owned. But the antidote of monopoly is competition; and let it come about that corporations be made reasonable safe, and therefore desirable, investments — let it come about that the corporation shall no longer be regarded as a mere financial sinkhole, except for those skilled in its ways — and there will be abundance of capital at hand, as the bank deposits show, to put in the field a competitive corporation, whenever in that field monopoly seems to have established itself. Indeed, the chief reason why any monopoly can now maintain itself is, that besides having a grasp on all the physical sources of productivity within a given field, it has a large grasp, also, on all the financial resources that would otherwise go into the building up of competitors.

A Nation of Dependents

But the transformation strikes deeper than mere economic conditions, or the natural laws that govern monopoly and competition. The transformation of the ownership of a country’s industrial property, from its people generally to a few of its people only, reaches the bedrock of social and moral forces on which, alone, the whole structure of republican institutions rests; for, under such conditions, instead of depending, each on himself and his own intelligence chiefly for success, the great bulk of our people, increasingly, will become dependents upon others. Those who possess investible means will come to rely solely upon the great financial institutions; and those who possess nothing but capacity for labor, upon the great organizations of labor. That is paternalism; paternalism in almost its final form; the paternalism that will eventually divide the country into two hostile camps, the camp of those who have, and the camp of those who have not; the paternalism that speedily descends into actual state socialism, or a dry-rotted citizenship as nerveless and squalid as state socialism.

Here, then, in our own day, and at this early hour of the day, is the parting of the ways. Ahead lies the road to paternalism. To the left is the open road to state socialism. They look now like distinct ways, these two roads, over bogs and precipices all their own. But a little way ahead, within the distance that any clear eye can carry, the two roads meet. For let it not be forgotten by those who preach the so-called rights of “industrial liberty,” that the out and out socialists and radical labor men are not the only influences that are pushing our country to the edge of the socialistic precipice. These have allies; and the ally on which they most rely, and justifiably rely, are just those men who, regardless of all considerations other than those of money and power greed, are launching the dishonest corporate contrivances, that, under our existing corporation policy, obtain without hindrance the credit and sanction of the government’s great seal.

The Safe Road to Individual Proprietorship

It is only by a turn to the right, by what may seem to some a sharp turn, that our one safe pathway forward will be found. That way lies over high ground, Individual Opportunity — the opportunity, actual as well as in theory, to each individual to participate in the proprietorship of the country. That ground is, in its best and highest sense, republican ground. To gain that ground, the paramount problem, is not how to stop the growth of property, and the building up of wealth, but how to manage it so that every species of property, like a healthful growing tree, will spread its roots deeply and widely in the soil of a popular proprietorship. The paramount problem is not how to crush, or hawk at, or hamper the corporation, merely because it is a corporation; but how to make this new form of property ownership a workable agent toward repeopleizing the proprietorship of the country’s industries.

The first step in the solution of that problem is that the government obtain a full grasp of the whole subject matter; and this, in my judgment, can adequately be done only by putting aside the five-and-forty bewildering state hands, for the one great national hand.

The second step, the step for which the first is taken, is to take care upon what kind of corporate proposal the government’s great seal is set — to cut out the stock-jobbing corporation; the water-logged corporation; the mere vision of visionaries; the labyrinthian corporation whose stock and bond issues are so purposely tangled that no mind, not an expert’s, can follow their sinuosities. In short, to regenerate the corporation.

The third step is to open to the wage-earner of the country the road to proprietorship. The basis of every successful enterprise is the command: go forth, increase, and multiply; and to no enterprise can rightfully be denied the fruits of that command. But capital is not the sole thing that enters into enterprise. The skill that puts the ship together, or that subsequently pilots her, is not the sole thing. The men who drive the bolts, and feed the fires, contribute; and to them, as to the capitalists, and to the captains and lieutenants of industry, should go a part of the increment; not as gratuity, but as their proper allotment out of the combined forces that have made the enterprise successful. Of course, to make such partnership between capital and labor a thing that ought to be done, is the work of the big hearts and big brains in the industrial field. But to make such partnership a thing that can be done, is the work of those who shall recast and regenerate the country’s corporation policy.

Will Democrats or Republicans Enlist?

Whether either of the present great political parties will be found willing to undertake this work of regeneration, I do not know. The main body of the Democratic party would, I believe, enlist. But on one of its wings are the influences of semi-socialism, and on the other a band of so-called conservatives, so conservative, that a single utterance against the sanctity of the present go-as-you-please corporation license is looked upon as political profanity.

The main body of the Republican party would enlist. It was the early Republican party that, through the Homestead and Preëmption laws, peopleized the proprietorship of the public domain. But the Republican party, too, has wings: and it cannot yet be said that the wings may not, on this vital issue, hold back the main body.

But the day of regeneration will come, the day when some party of the people will cease to minimize, to compromise, to hide behind promises and looks; but, going to the root of the matter — the depeopleization of industrial ownership under present policies — it will build from that point upward. That day will come, because higher and higher within the heart of our country is rising the voice, What shall it profit us if we gain the world, and lose our soul?

Republished by the Center for Economic and Social Justice, P. O. Box 40711, Washington, DC 20016